Political risk is back on the table in Egypt, and it’s threatening the country’s status as an emerging-market darling.

Egyptian assets have come under pressure since Friday’s anti-governmentprotests alleging corruption in the military, with 12-month NDF contracts for the pound rising the most since March 2017 to 18.38/USD (versus the spot rate of 16.29).

Stocks have fallen almost 7 per cent in two days, the most in more than three years and the biggest drop by far among equity markets worldwide.

Until now, investors have put political concerns, including the government’s jailing of thousands of opponents, to the side and instead focused on Egypt’s macroeconomics.

Thanks to IMF-led reforms since 2016, the economy is the fastest-growing in the Middle East and North Africa and the inflation rate is the lowest in 6-1/2 years. All that has helped Egyptian assets outperform emerging markets in 2019.

It’s taken years for Egypt to rebuild investor confidence after the government turmoil that followed the Egyptian spring in 2011. While it’s still early going, the quick selloff shows how precarious that sentiment is.

Meanwhile, Egypt’s stocks market fell in early trade on Monday, extending the previous session’s sharp drop after protests broke out over the weekend.

On Friday, hundreds of people protested in central Cairo and several other Egyptian cities against President Abdel Fattah al-Sisi, responding to an online call for a demonstration against government corruption.

The blue-chip stock index fell 0.8 per cent after Sunday’s 5.4 per cent plunge, its biggest since June 2016.

Commercial International Bank declined 0.9 per cent and Egypt Kuwait Holding lost 2.4 per cent.

The broader stock index dropped 0.9 per cent, hitting its lowest since May 2017, after shedding 5.7 per cent in the previous session, its sharpest since November 2012.

Trading was halted on Sunday after the index slumped 5 per cent, the first suspension for such a sharp move in prices since 2016.

In the Gulf, major stock markets were mixed, with Dubai adding 0.3 per cent after four sessions of losses. Dubai Islamic Bank rose 1 per cent and Emaar Properties was up 0.6 per cent.

Deyaar Development gained 1.2 per cent following an update on a court judgement that came in favour of the company in a dispute related to a land purchase.

Abu Dhabi’s index was down 0.6 per cent, dragged by a 1.7 per cent fall in market heavyweight First Abu Dhabi Bank.

But Abu Dhabi Commercial Bank (ADCB) rose 0.7 per cent after the lender said the Egyptian regulator exempted it from making mandatory tender offer for Union National Bank’s shares in UNB Egypt.